STZ - Earnings call transcript Q2 2020 | Constellation Brands, Inc.

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Operator

Welcome to the Constellation Brands Q2 Fiscal Year 2020 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode.

Following the prepared remarks, the call will be open for your questions. Instructions will be given at that time. I will now turn the call over to Patty Yahn-Urlaub, Senior Vice President of Investor Relations. ahead. go Please

Patty Yahn-Urlaub

morning conference Good Bill to second CFO. Constellation’s our Thanks, I and am XXXX our Klein, call. and with here quarter CEO; Joelle. David welcome this Newlands, morning

filings between a this non-GAAP to website in risk at the statements other discussed for our the As release measures Constellation’s news reconciliations most comparable release otherwise and make financial are GAAP call we this may refer call. company’s or which www.cbrands.com. the impact directly and on news Please any measure included SEC factors on reminder, available forward-looking on

Before end ask call to that our Thanks in call prior will now question to to everyone turning limit which the one on is to time. Bill, I similar And Bill. we per advance. like to over here us would person, quarters, help

Bill Newlands

performance Welcome while pleased Thank our our to I business. transformation driven earnings We you, to this transaction, delivered be to an the sales of And Gallo discussion of strong and activities am continues by of our morning and transition impacted quarter and good the second quarter and results. of Patty the related pace progress excellent strategic beer business. everyone. Constellation’s spirits with wine by portfolio

we to working Gallo like while deal. review FTC, half at of and year cooperation the you Now the continue key Constellation in that as full and would are are second the our the Number with spirits to I they two year, point halfway points focus on in unfolds. wine the one,

year-end expect we close to We will our the are ability in occur fiscal by which now XXXX. transaction, confident

more one Constellation’s the during close end the our to clarity transition. EPS beer two, committed updated on guidance Meanwhile, we Number are high-end market get XXth leader of this our our timing. of the beer accordingly share assume fully well into prospects for XXXX second confident This future. in portfolio high-end to of the that remained iconic but XX% U.S. the at consecutive in with of we we of entire For quarter, adjust growing quarter, we growth holiday. supporting number throughout share for and will the now, remain representing in collection exact I as the growth summer the we have the the Constellation is business third consumer-loved quarter beer brands market, business fiscal every

confident? prevalent Premiumization for like Hispanic roughly U.S. expected Several Why continuing a consumption significant drinking so in trade-up of more to trend beer Michigan, population growth of entire reasons, is where X%. are middle is the becoming market U.S. David CAGR amount market. a age at continue occurs. alcohol Legal beverage and a and states I high-end is total Ohio

shelf, with traction distribution first partners. shopper ample We key runway is have initiatives a for from which compelling opportunity like retail our

opportunities innovation to significant increase portfolio. have our for have key the strong penetration household complement with and other opportunities to the will continue pipeline we We growth is and brands beer

represent that Corona know, Modelo the brands our families you of most and foundation the are As powerhouse the of brand business.

the some drill let’s families. brand opportunities details down and these for of discuss within brands have So, specific we

and the grow with the a with overall significant by and sales the upside Modelo multicultural growing growth second XX total which beer beer the the consumers. with achieved the and milestone rate recently category and number U.S. remains market. out with contributed both XX double-digit quarter growth significant Hispanic non-Hispanic Especial almost during number dollar of U.S. Especial, there Especial of beer to Let’s XX% import is and the quarter. the [indiscernible] growth these states. category beer most consumers, one depletion in five to alone in Modelo Modelo entire penetration start continues during new acculturated generated becoming in Modelo

As beer Especial. households to non-Hispanic X% a estimate of we only XXXX, X% Modelo in fact, drank calendar consuming that of matter

For Modelo it reference, to currently command at XX% the Extra great that’s half and top on-premise, roughly Because just has then in Modelo other beer accounts penetration that space velocity, should brands. excellent momentum more growth shelf non-Hispanic the that Extra. distribution retail Corona the And has of Corona in compared has beer Especial households. over carry

and Modelo already had Bottom we XX-ounce cans. launches year the XX-ounce of future. runway Limon success y well have this We Modelo growth for Especial the significant line, this into have Sal, with Chelada Modelo bottles, with brand excellent Negra

number Corona brand is almost to the space This moving in at shelf grew U.S. Now the which XX%. beer on market. family one family brand high-end the Corona, spring, retail

has competitors Refresca pack trends trend the One increased Corona beer in three of of one this five brand the during growing become of growth gainer channel posting key in accelerating space, Refresca category the summer, has channel, becoming in trial. U.S. Premier, high in our the while end the summer Corona and drive it number of dollar on-premise on sales. that Premier Interestingly, beer this Mike’s with distribution Corona was item has family. sales in fastest throughout focus quarter higher this depletion to trends new top in its on the channels become channels consumer quickly the double-digit share during based the IRI With this key the a the experienced drivers which a the key velocity second quarter. Corona Refresca IRI months, variety

brand to the excited planned for family. seltzer innovation very that launch new next our the be are We will for spring big announce Corona next

on weigh been course, one we population perfectly brand admittedly, total most both drinkers and strong to the new as of age has XX loved brand among you unbelievably refreshment put shift characteristics low-end seltzer. to and that’s Now, lime. we And zero the Corona leader. the with the The from share seltzers match to Hispanic where of sugars. Corona into tropical why and high-end, the our and seltzers blackberry brand and introduced to XX, market name have ABV the four equity Corona the XX carbs brand zero with carries refreshment decided We mango, believe as X.X be Corona lime, here will stay will DNA. number that of in the are in therefore seltzer flavors, at all category But are cherry, know, will one hard secrets. calories accelerate including kept volume the worst this

in Last, brand. to coming as incremental certainly draft our produced well not to Anchors from the independent for formats brand growth product, of growth campaign. the Extra we campaign market throughout and be Corona future which increase marketing now are the U.S. runway entire number beer continue Live as Pacifico this fiscal continues the So, national we can boast Extra, spirit six plan marketing quarter driven past velocity least, to and investments as brand will trends let’s to Corona and Xx double-digit retail remainder year that for move of Up depletion There our on advertising support by this Life category. contributions Coronita promotions the with the but this the the the is with and

years achieve come. innovation, to X% our EBIT have business sales through and fiscal tremendous As beer net for opportunities confident these to combination distribution, in X% in beer and grow Considering we the the and portfolio ‘XX you factors, enhanced growth of executional business a see, ability to to for remain across opportunities can beyond. we our

their impacted now be to Gallo. continue change FTC by performance work the to finalize wine have business portfolios continues transition and spirits, spirits to I with of and with the upon of we the our transaction. who Moving in as ownership the brands for close Meanwhile, with activities distributors pending reposition mentioned, to wine to begun transaction

returns The modeling on imperatives we return tools types similar that we business key a last power have didn’t in executed select for a under year. we the strategy for business. implemented what a overlapping as second the based and returns Why that beer. they wine that promotional might target that repeat evolving At did target have are this we brands and activities time, set ask? for promotional higher a spirits more strategic of strong addition, meet transformation these do you disciplined In not year we quarter revenue very of new activities to the is

depletion single-digit range mid are to are growth we flat, in ‘XX depletion our While in confident fiscal brands for our deliver ability September brands the trends expectation. of for our has power for year-to-date that and this portfolio reflected

the the outperforming that quarter, pleased takeaway trends brands, believe? We continue sales we growth will during U.S. As believe these fuel in are with in that This forward brands. power our mentioned, power we which significant of I wine reasons dollar are brands strong the demonstrates grew the X% consumer-led momentum, consumer experiencing X%. takeaway growth consumer are the channels have IRI also the total trends to for will second half. What for going which

impactful launching with key holiday month. innovation primed selling begins In this which new addition, pipeline we have products for an season the

price that share in successful become most wine in earlier segment top trends wine launches, taste excited growth the segment. on We of launch are in U.S. the a in our especially canned terms We was growing format in can both the which can and and year. since appearance of we super wine the of fastest one point Union, we will in this one It number gainer a proof is a can premium Crafters our the inaugural about has capitalize industry. our with have X attractive a this wine believe brand which and in

introduce number Rosé Woodbridge the not Kim And in well. a In cans, but SKU Sauvignon in the will format. addition this also growing U.S. we that can, to plan that a will format in a launch in as Crawford Crawford to only launching the Blanc Kim in being being tetra-pack can wine fastest we format, one

release Blend, as In as Barrel Mondavi Rye efforts tetra, in recently introduced the was fall into our in market. the Buttery addition Robert slotted which for Aged Red Private this Chardonnay the cans to is Selection well

throughout of expect, and you innovation efforts As would campaigns the portfolio. remainder support the strengthen impactful brand marketing will to our and with the year building continue we build to

to front, outpace takeaway in SVEDKA the consumer robust of channels marketing expectations, by IRI post our On Bring the portfolio well. campaign Own our core healthy while the SVEDKA in continues sales trends extremely during spirits X% Rosé the bolstered growth offerings to remain Spirit. Vodka as quarter Your continue

double-digits distribution for we that expect in been to West to gains, High owned an by our IRI whiskey remain portfolio authenticity growing contributor and the we American forward. growth Driven taste, have brand years X the High award-winning going solid West has brand. continue to a Our strong

we deliver execute our signed as we growth consumer-led to our to for sell premiumization million. $XXX transformation accelerated continue to agreement Canadian aligns to for an action During business. This strategy Black Hill the Whisky quarter, Heaven with Velvet strategy the

we as two quarter Our the new minority made investments. quite ventures team was active during

Montanya is be first American distributed Colorado-based The award-winning and online. Montanya’s XX more rum rums and X maker. currently countries states are in craft can Distillers, a than overseas purchased

Durham is cocktail the one a canned second liqueur craft that and ready-to-drink number Today. U.S. by was craft as gin, vodka, USA the Distillery, recently The distillery in recognized gin producer

awards. spirit evolves national brand across and will beverage alcohol. businesses the for investments more of makes XX initiative Additionally, premiumization, our our innovation in earned building than investments maintain and doing Durham disruptive part Overall, has and we and wine Founders to international female-led Female focus Both our which on continue strategy work transformation these as business. meaningful are innovative

few in be to cannabis continues the Canopy leader in total comments global a our about Growth, investment sales. which Now,

approval and Acreage to permissible. for the market Growth Holdings and received U.S. Canopy quarter, the enter cannabis shareholder the agreement Acreage Canopy right that overwhelming federally once the acquire grants During

And in the As passed SAFE of reform, House U.S. I was position Act leading have you speaking provides of for federal recently know, Representatives to see the excited majority. that a wide path to reform. that this the cannabis upon the by Canopy a opportunity U.S.

access Senate services in need While deliver of traditional in banking the also this for legalization thousands and positive moving businesses would to shows forward. legal bill approval, cannabis the momentum U.S. debate it

form actively bring various marketing of edibles as plans Canada range well launch will been when fiscal forward in year. U.S., higher has Canopy the necessary products unveil the and team including products and their value-added to to the Canopy developing portfolio We high-quality are to CBD Rec of the U.S. their as of a X.X securing market products factors, the also margin the these of related resources end bake. In drinks, in looking by production

edibles, they the beverages, skincare New with product the therapeutic softgels. progress we are include CBD in the Overall, last offerings and creams, cosmetics, oils have team months. Canopy done of few and pleased and what

the in of progress halfway In the with business mark closing, I at the pleased year. am our extremely

Our transformation spirits successfully and beer results and to business continues deliver strategy. industry their is our leading wine executing business

the returning we this cash commitment the and business to made the demonstrate repurchases bullish with I remainder prospects the about share for quarter our continue am across during to shareholders our We to of year. second

would quarter. With turn to the call that, who second for over to will I the our financial review like now David results

David Klein

good produce to and and flow morning Bill strong everyone. Thanks, QX, beer we delivered cash performance results. continue operating In we superior

with results transition Our line future Share execute shareholders. generate in into our ability for to during tier wine produce top business the this confidence well delivered year. repurchases reflect as returns expectations quarter commitment the in our to growth and our we

have impact. to range $X.XX. full $X through range our Canopy diluted We EPS narrowed year increased and basis earnings equity comparable This excludes

the on of and the guidance now closes Gallo with November assumes Canadian QX increased X. closes Our the of Velvet Black Whisky at transaction divestiture end

selling mid the selling our accelerating X.X% quarter. full our which Now, growth basis starting growth on financial in sales This depletion in generated more more year let’s less at the for than performance on our Net showed I we of helped Depletion When generally the sales and of quarter, business summer comparable with outlook reversal The results day net growth guidance, adjusted for increased volume shipment expected. was single-digit than X%. last less strength of detail, of trends during review continued season. the where X%. focus reflecting benefit QX growth, QX ahead in some QX key timing X% brands beer. will provided coming X

of launches. acceleration continue this to Familiar when second into the no the Premier the and half longer year we of are lapping expect Corona We

As a flat note, year-over-year. are in QX, selling days

in originally of These reflect achieved year cartons. net productivity increases the mostly and from Beer contractual of with we year, cost offset by pleased success percent revised in and cadence marketing lower XX in pricing Marketing I first than were the I a Benefits half by glass sales XX the planned a in offset operating our inflation points increased to in partially other basis Marketing came savings primarily currency us the in spend materials margin COGS a were increased business. headwinds which the helped XX.X%. magnitude than will points initiatives. to COGS. The foreign higher record of in X.X%. anticipated discuss inflation basis minute. spend as as for driven am higher productivity earlier

our growth For points margin fiscal our is net of of to prior full compared XX%. to original our compared X and ‘XX, the an expect year sales This flattish expect we X% to portfolio. XX.X%, includes operating X result X%. income continue to Mexican now percentage year be to of operating of pricing which improvement within to guidance We

productivity mostly year We and are and initiatives. to as expect headwinds margin pricing continue to for be inflation gross the cost to growth our flattish investments being by expected product offset

the anticipated. the we to we of are Some materializing headwinds cost not originally that levels projected

in our impacted the of reversal benefit ERP timing of system implementation Mexico. from and remaining shipment S/X back fiscal be in half will margin HANA operating ‘XX the the SAP However, by

expect In in addition, be half marketing closer from the to fiscal to our to brands to of of the half. We the support XX% net as believe a it’s to range. second top we first upside now our our prudent percent success reinvest ‘XX some margin of X.X% sales

family. brand Corona the on focus mostly will investment increased Our

reversed benefit in As earlier, mentioned end ‘XX of QX. the the fiscal at shipment timing partially

We expect in reverse the remaining shipment timing to QX. benefit

lowest last investments. and quarter primarily been marketing Over QX seasonal driven has the lower plant by years, X our margin throughput

to a as than sales of greater expect percent We be QX marketing net XX%.

be these just margin of we XX%. over operating to result expect a As factors, QX

now transportation primarily XX%. to expect the marketing transition depletions costs. operating COGS our to brands XX%. was driven XX% increased XX%, and Wine reflect XXX Higher COGS higher and XX% wine We throughput spirits, wine lower margin and spirits sales driven headwinds, decreased by operating spirits investment. decline and These X% and end with and volume to lower declined associated decline decline points declined sales to ‘XX net and largely activities trends were This approximately net XX.X%. to by shipments Moving down fiscal and income basis cost primarily transaction. freight

assumptions reflects earlier. guidance the transaction revised Our close discussed

of the spirits result to ‘XX and million the million cost for the to $XX wine $XX stranded expect a transaction, As compared assumption $XX our we previously disclosed. guidance fiscal removal QX approximate now close to million

is that focus IRI remain for business takeaway we of However, removal strategy of spirits power marketing channels. continue reflected we the single-digit by transformation stranded brand working. $XXX committed benefit margin operating to to depletion cost we In XX%. Power term, in mid investments, the from growth our remain I total migrating increased in solid and which million confident brand trends while target performance is an ‘XX, end approximately net continues in to to growth. ‘XX. fiscal expect these the single-digit produce mid brands Longer consumer sales of to the fiscal the wine

brands the will based transaction of the in determined when be it’s purchase up consideration future on million expect contingent the recognize the $XXX to of on record loss the rules sale. form we the As impacted election contingent to be held-for-sale. wine of we process assets continues note. to spirits we sales with QX XX% EBIT now the to other Gallo, net activities. and it’s by To that to this close spirits through likely expect point to discussion, one We transaction portion have be of a transition to quarter, I targeted Accounting third business decline and the price Therefore, the XX%. the work govern the in consideration to write-down realizable. Therefore, to of believe for and performance finalize our wine

at corporate the let’s P&L. the rest Fiscal proceed $XX expense million. with in year-to-date of came Now,

in Growth of due XXXX. funding Canopy of second related is SAP year to our in million million. interest incremental and includes expense of This QX, now for reflecting incremental to November ramp IT full transaction increased approximate This expected In spend, $XXX $XXX a to interest S/X the expense the interest corporate approximately investment interest expense our expect which $XXX HANA reflects range Fiscal the million to spirits timing. XX%. expense million be ‘XX to implementation. in reflects half wine $XX We

and benefits. came including rate Our XX.X% QX higher year. effective earnings, at The stock-based rate, a basis compensation foreign versus last equity lower reflects decrease Canopy XX.X% earnings comparable tax in on

Our fiscal excluding XX.X%. equity earnings year-to-date comparable is basis tax rate, Canopy

our tax rate, ‘XX to continue We excluding fiscal earnings comparable forecast equity Canopy XX%. year effective full impact, approximate to

define to we reflects flow operating for Moving We of primarily generated cash free flow by the first $X.X flow fiscal cash of free is Free which less an impressive CapEx. operating cash as CapEx lower The half activities timing. and to ‘XX. This due represents net billion cash increase. improvement provided XX% lower cash CapEx. primarily flow strong

as reflects free range $X.X $X.X be of of from and wine to benefits. billion flow sale to million and $XXX now brands as to billion. approximately cash This glass continue spirits the investments year CapEx We increase an as glass of as in plant. breweries operations million CapEx for at Mexico range $X.X cash fiscal EBIT our of Mexicali tax furnace the full Nava to operating billion cash be $XXX billion million. well in for of well targeted expect the to and the in We expect beer to the additional the quarter includes spend This including fifth $XXX Obregon expansion, $X.X ‘XX flow

QX, Canopy loss offset from XXXX of and the million. recognized on share Shifting $X.X These of CBI investment November Canopy of net Growth’s quarter. comparable we to was approximately resulted our gain basis from of in the loss reflects Canopy approval earnings, Canopy offset shareholder gain equity results. pre-tax the impacts This investment a $XXX our additional of billion partially $XXX in by modification. since for total Growth, gain of decrease proposed by warrants than in value were our Acreage in excluded and In acquisition which on initial modified recognized more the Canopy is fair million net investments

performance everyone, Canopy are earnings share. business per will ‘XX and have rate fiscal path equity and This equity factored Canopy’s and not business. our release, earnings on basis and the core impact, continue fiscal quarter $X.XX recognized basis of issued attractive used focus be investors guidance to EPS non-cash their to diluted redeem would evolving the $X July, rate In As notes million second they in ‘XX as to Canopy $XXX an at allows $X.XX. equity our totaled comparable to our the to senior like debt. summarized our EPS, of results focus profitability. of to interest volatile into earnings Canopy we income rapidly their remind earnings range I proceeds we fixed is higher us in comparable financial statement excluding likely on

the our with pleased toward equity Canopy we’re excluding are earnings. making goals, progress de-leveraging We

million end net during fact, fiscal of stock the million us In level more since $XX by our to we’ve worth $XXX of the reduced debt quarter. than repurchase opportunistically This allowed ‘XX.

opportunity shareholders prospects In closing, future billion during flow space. $X.X best-in-class to business to are growth strong we’ve believe CPG the to have cash we returning the a quarter made long-term of reiterate, within creates I’d we share committed The ‘XX. our reflect We our in ‘XX through and fiscal model. repurchases combination fiscal confidence from the like

I and Bill happy your that, are With questions. take to

Operator

first Instructions] America. Our Bank [Operator Spillane comes with Bryan you. question of Thank from

now line Your is open.

Bryan Spillane

good everyone. Hey, morning,

Bill Newlands

Hi, Bryan.

Bryan Spillane

Hi.

business the spending So that year is a my to more? the this beer up or you step support step innovation in forward XX% revenue potentially will investment to sort innovation to is good baseline given year, of into kind the still business, is initiatives you to I going of pipeline levels or innovation behind will so of of and yet and that if question the basis year or it had going of terms this guess, is, next marketing have up this use support that going have to the

David Klein

that we the be in plans done in do still somewhere process so finalizing in the but with - of spend year, consistent of XX% we’ve to fiscal expect that year, range to we’re our next all range. X% for this our it Bryan,

Operator

And our with from Kaumil question Thank Gajrawala comes you. next Credit Suisse.

is Your now line open.

Kaumil Gajrawala

are you? if couple years on you you the some over your want moment, of at give Good to and forward? how insight guys. you talk contribute Can innovations about afternoon. Hey, contribution from expect some of the the little depletions to a maybe last Hey, bit these to going it then how

Bill Newlands

everything a Certainly, introduction particularly been expected. who on-premise consumer quarter. is appeal a low-carb those for sub-segment, And see the are as Premier to the this to It’s during offering. looking acceleration, has we individuals new which we noted, continue we in

we’re of We’ve the bottle for us pleased smaller So, seen format for very as format very good been with well. that. addition the the has bottle Familiar,

we those during adjusted beer introductions. given early David of As depletion I shows the from our It’s strength which basis of roughly pretty the noted, business those overall year we of X.X%. on growth that two with all of think quarter, lapping our last had days overlapped a this introductions powerful

which add as our has expectations You Refresca, then exceeded well.

sub-categories. strong velocity As into the in other to competitors and I of DNA that than one that [indiscernible] we are FMB strength from of we in space, well. is that that better the expect its Corona script, the It the and brand key noted as our in future refreshment the franchise things shows that extend my of able

David Klein

up talking business beer made includes XX% Corona growth really I that And our to grow high-single next years, is we’re digits say add that about. in and Yes. that over algorithm, of of the innovation, and net that in Kaumil few seltzer we’re we Premier new the our going that and that clearly would sales to

overall depletion day really innovation significant business, drives called thing other within that the which it grow is growth beer a The beer as of business. just continuing want that business, relates the us to our the to last QX, out the big work sell our in driver out I to range. we has to That point growth the in and X.X% share in to

Operator

Thank comes Jefferies. Kevin next you. Grundy And question from with our

open. is now line Your

Kevin Grundy

guys. afternoon, good Hey,

Bill Newlands

Hello.

Kevin Grundy

big And undifferentiated next defining paramount, brands, think rollout for you a so to product seltzer can of on all models, sounded seltzer then, are you X Question, rollout? you there related would year, sugar category Bill, X of to success on what How the helpful? course for to any handful the next pace but calories comments say spike over, existing a you is category your this how that, all product and spiked have this become in the be internal questions Corona think the The fairly years? based pretty ABV similar differentiated point. do Thank will how the be is at content do you.

Bill Newlands

Sure.

that’s an think evolving answer. I

growth surprised been is I What particularly somewhat season. has seen by selling seltzer of we’ve everyone the think, aggressive course I say the that this the in this. business, over would

that market. high-end We we the it said we on product. with our that more could competitors will and I the carefully entering this be would carb, margin into introduced zero amongst that structure. with quarter this to discussions marketplace. a one think have This profitability anything profile as product a superior point. prior we I and not that to of superior introduce assure don’t add superior our the with unless particular product. at would the zero any brings category. think said. is look refreshment significant Corona what else I to will you relative We unique a in find would expect very franchises gain sugar you a been amount we category I with And share can with of versus structure do superior the product in profitability a margin be have that products this I’d we felt we other other

Operator

Bill comes next with Kirk Partners. MKM our question Thank you. from And

Your now line is open.

Bill Kirk

the Hey, question. for thank you taking

that transition it the giving loss maybe the since of for cases much had growth the on One, leaving attention two, is system? brands me not as result one just seems So you saying divested brands, of distributors are have negative the those they is they wine into much fair? And of brands their or trade putting many be is an additional as are may those aspect leaving you your spending there houses. maybe dollars since putting are as not

David Klein

Yes.

So Bill, the them way in the his brands, In when our won’t get look, their understand like we distributors continue as them said, the to that power full talked that, we’ll be Year-to-date, have would confident portfolio, disciplined it’s brands we continue course but Brands house, difficult we strategy drive to switch the of to called support to to back to. result you that comments. but to general, we’re below as about the remain for depletions Bill the more to get our of number execution in year year that digits. that of brands mid-single we a over out

Operator

our And from question Teixeira next comes Andrea you. with JPMorgan. Thank

is line Your open. now

Andrea Teixeira

Thank you.

just to just and be able I what the know definitely see making But channel to lot deplete. kind some hoping look I So, and a to there of you and comments track been on on you of of so obviously the on you and reconcile. still is difference on also when between was the can on-premise when inroads obviously reconcile if off-premise a granted I was cans you’ve at, hoping on-premise, the that you draft.

it but more then if helpful to always you see to numbers, obviously hoping saying, you’re you. I would Thank you skew track for if as into California investors. going where the was I clarify, So channels trail and can think your be are,

Bill Newlands

Yes.

operate XX weeks. with day run and the than for is depletions data So, that and you for IRI When disconnect remember we the market Meaning, because our IRI. that between just the normally rolling XXX you to XXX point lower thank – Andrea, sell depletions question, IRI. our adjust data, depletions basis a

basis XXX We within are back XXX delta, that right. point to

So there than more really It’s unusual is any we normally a disconnect. experienced. not

being the individual at we to were share at quarter up, on-premise look in grow on-premise we we aggregate, single-digits. channel, in you up look low when the in the then So continue when

that industry low-single in think I or area. down somewhere digits was the

all So, we business. continue to beer our perform well across for channels

Operator

Thank And question from you. with comes next our Sharma BMO. Amit

line Your open. now is

Amit Sharma

good Hey, morning, everyone.

Bill Newlands

morning. Good

Amit Sharma

pretty – I And Just it? about to basis in South there’s it having two clarifications. competitors, meaningful beer your XXX David, acceleration Bill, if to so point the about also IRI show XXX margins to a One, think then, right to you and you superior mean August is IRI as the second is metric delta for superior margin trends September. talked

to stronger So QX? at certainly you depletions say in data, did at least about back what does looking the be what going it than much QX

Bill Newlands

Yes.

of into kind first seltzer that So, the over yet production will I case question, for one that business. the comments similar as scale And Corona we expect we’re we through accelerate of of all go to depletions, be we’re all September Premier our past to in and we a the really and margin without last take as expect we up time think, on to Corona to the commenting when I deliver beer fully said my of continue our the in Familiar. we year rest launch year depletions have to we

Operator

RBC. And you. Nik with our from Thank Modi comes question next

now open. Your line is

Nik Modi

everyone. Good Thanks. morning,

Bill Newlands

Good morning, Nik.

Nik Modi

on can then, two tested any mean seltzer there bigger quick the I And have just you had and this brand, looking share the question terms context of – to be I buyers. guys the I transaction the morning, on Is can concept the potential value around – any the mean, FTC of you but wine with market. realize the picture you’ve us good is I other Bill, this quick Gallo, a would with yet? at but fast here, that with questions. spirits things if have maybe already go be I you test more revised? two deal turnaround know pretty curious in helpful? from is some mean, is,

Bill Newlands

do, new sure that obviously around testing right always our that when But will profiles we to better the done perform Relative product, have than battery have I mean flavor And question a introduce both market that we, testing, of Sure. do the of we that make any we have the a consumer test. not we by competition. it we we at look. packaging right the to as

As to be a prepared in launched you the we I it. we in said wouldn’t going to think my or this category demonstrable have winner David, the product want do answer other? remarks, is

David Klein

Yes.

to need way of work Gallo to process takes. So, through the will done. our the the confident that Nik, we form remain transaction that it final kind see We get

we’ve talked that my brands the in in by set is see out As Gallo a mean on part and that the right of brand we that recognize the $XXX and third I what in that. called also and dispositions million script, Q, of of about we I that Velvet we quarter you’ll including brands Black have loss out the the listed will

in operating a high and going on confident done we’re a when that end the to our that digits deliver dealing We’re that result mid-single work portfolio we’ll nor that really well pretty about we’re focus that, disposing of end we’re the transformation we’re a with And that up we’ll gain as that’s with of the of positioned up that loss XX% wine regard. of through, with end have a will and grow push with business all and then, portfolio neither required the can a margins. around industry

Operator

you. Thank

Our from Rob next Ottenstein Evercore. with question comes

Your line is open. now

Rob Ottenstein

thank accretive in view category of a on lines variety a do in are your product my great then are wine tried set of in much up for kind also What beers cannibalizing yesterday, apologies. And very and cannibalization thinking exciting. how pack? seltzer, both very differently? XX-XX is beer Great, few Corona some in and XX product, terms in spirits, finally, But, your the are your beer it – category questions on thoughts about you automated you of for Atlanta – you as it’s more the then Thank the you it’s you. and the you terms

Bill Newlands

to panel our glad Robert. you consumer time, you add will I’m it, Well, liked Sure. next

So, like it as well. we

I would what Here’s say.

and is on months. franchise. to many recently, if the Obviously summer to both we beer our XX% – this back be with had to take I some which that during XX%. in will done to growth closer had expect portfolio, accretive of what our brand Premier the franchise accretion that overall heavily But have we’ve more which Familiar, We beer and franchises most other all overall to impact than being you Premier our seltzers seen

that forward, These brand going said. Corona we you products. portfolio franchise overall expect for is delicious the just additive are to this is to going very would our going to be So, be certainly and tasting a what factor big

Operator

Thank you.

Our question of comes Barclays. from next Lieberman Lauren

is open. line now Your

Lauren Lieberman

Great. Thanks. Good morning.

Bill Newlands

morning. Good

Lauren Lieberman

of through major the went all stuff like and of franchises you Bill, trends. brand in bunch

as with rest it’s when as like What about Corona what by we Extra? like to think differently? was aggregate, of from I sort areas strongly in accelerate So up to the depletion here, cannibalize feel you And are portfolio. it Corona do think expect you that really what performance? stepping you Extra, that Modelo today? do you the growing In on they seeing is number, from about flattish. spending Is are in as Corona medium can but if Light, guess, particular of I what it targeting of Corona launch, And the talk we of the the Premier, didn’t total seltzer about is, you outside are size thinking so pieces and you’re reasonable Thanks.

Bill Newlands

Corona. as support noted Sure. for We of for between increasing Corona on you Year-to-date, interaction some fire, is are obviously which obvious this And and the fiscal is, year. Corona our itself are And flattish. Extra I correct. there are remainder Extra roughly Modelo,

things a the of movement automation. performance and up during of second just family Extra, we in family happy not that second, within answer acceleration And a the but continue with that the growth was long our Pacifico given for Refresca Premier lot expect there continued to I we your bit to continues with than a ago. so there remains realize, double-digits going lot on would in I depletions now was apologize Robert back Robert So as about Corona of brand with strong in a other overall Corona franchise, area. I – call quarter did question to not the be I like little noted that members own grow. is

think for pack, which within sure an – ready question mind. real go in to a to question your am we create how you pack your answer is to variety I efficiencies that approach have that real the We is have the you

we So, that operation do structure. our current to are set within up

Operator

Thank you.

with comes Our from next Azer Vivien question Cowen.

Your line is open. now

Gerald Pascarelli

Gerald on is the This question. Pascarelli very taking for Vivien. Hi. for much Thanks

Bill Newlands

Yes.

like sound don’t Vivien. You

Gerald Pascarelli

believe of So, you’re on gain consumer And where the you you. share is Bill, on Refresca, sourcing just maybe on the based provide offered, mine can share? color trends on that us demographic some brand. Thank commentary Corona some some you around specific then, you color just

Bill Newlands

Sure.

still of are developing some answers. those We

you in stage. imagine, As early we’re the still can

have but that base demographic generally of One because the FMBs, that Hispanic our of of less demographic their strong with Corona the had we strong been around have affiliation aggressive a the Hispanic the noted community uptick we is in strong noted things Refresca. franchise, adoption with their

cold FMB largely product core is the you However, shelved our more place than in this we also are with categories different offerings. box seeing, the competing can rather much and as imagine, a largely Corona competes in with placed and

our So, that very very appeal and pleased are use broadening for with the sub-brand on we’re that audience occasions new well. Refresca we’re future to our broadening bullish and as

Operator

And Stanley. our next Morgan Dara you. comes Thank Mohsenian with question from

now open. Your line is

Dara Mohsenian

Yes, guys. hey,

versus instead beer looks traditional companies and I hard understand new have seltzer the the in launched used the distinct incredible beer. Corona question like segment an why seltzer. you traditional brands. on equity, a given names Corona brands the lot more So, help a brand of a albeit And have of that of with one guess, brand, is brand beer existing can us it category, follow-up choice is a seltzer right for there

that’s then, through me telling second, business hard and So, do maybe you over why are is others consumer the longer-term right you how concerns understand decision you. to seeking your is Right? think a minds brand the from And equity what your traditional help in that? guys what launch adding any but beer Corona and seltzer the a research

Bill Newlands

You bet.

product mind the whole in very you that in is mean, refreshing in whole is this deeply. first that all As fall you category we fall matter consumers’ Corona It’s can falls I DNA The imagine, which as that a beer. similarly Refresca. across a any the refreshment. the around is, essence to comes very, that’s discuss when no of tested sub-brands, question back response it refreshing thing the a – of

we that and felt DNA why match with of this core to category, One a DNA that to perfect, with it enter that Corona’s key seltzer is for refreshment. had the elements go with we is if consumer we that in were looking with consumer. do brand along Therefore, trust would the going the deep is the

XX XX. we As will strong in be seltzer to brand trusted we one believe very Therefore, space. is Hispanics the non-Hispanics and the noted earlier, number it this with a entry

Operator

you. Thank

with comes from Bill next Chappell Our SunTrust. question

Your line is now open.

Bill Chappell

morning. Good you. Thank

Bill Newlands

Good morning, Bill.

David Klein

Good morning.

Bill Chappell

of existing us on collateral some wine it personnel just on then Follow-up going at to from you it need forward least would – that behind fair dissynergies, the can color their the same? color brands that’s term so the there and in damage their then how like the business kind the how to are to near have amount of behind continue a – distribution there a more and spending seem your give and you the if like to would reduce on you sounds changes, little understand to more keep trying divestiture, presence

Bill Newlands

falls to distracting transition to our business. is focused With have There We deliver against continue the most and by the on the said, our entire IRI the we quarter, of power the that no as and remain number attention quarter X% growth distributors same the occurring most X% continuing into brand to recent exact internal question that recent in has well. up population. SVEDKA during results is during that results excited been to our

consumer potential and this to get are remain a that So, long we high-margin, and brands very be high we that be that come. remain businesses going transaction a strong to will as will very growth what products for completed time bullish franchises play

Operator

Thank not time, for any this to turn further at to Bill showing back Newlands call you. over now the questions would I’m any like remarks. further I

Bill Newlands

start our are strong powerful call. of you, of results, future Well, we performance and pleased collection bullish we the this joining discussion on both the as first brands. out year the very close let the of I quarterly say, of consumer the your with and David half And appreciate our connected to remain I thank me everyone.

call products have next of early our and to family Our enjoy scheduled to call on the safe with some and Thanks and be again during Please January. sure your is holiday quarterly great day. a remember and celebrations friends. happy for for coming have season a great

Operator

gentlemen, concludes you call. today’s this Thank and for conference participating. Ladies

You may now disconnect.

Constellation Brands (STZ) 3 Oct 192020 Q2 Earnings call transcript